Question on: JAMB Economics - 2015
The income of an individual increases from N150 to N250 and his consumption rate increases from N100 to N150. Calculate the Marginal Propensity to Consume
A
2
B
0.4
C
1
D
0.5
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Correct Option: D
Here's how to calculate the Marginal Propensity to Consume (MPC):
1. **Calculate the change in consumption:**
* Change in Consumption = New Consumption - Old Consumption
* Change in Consumption = N150 - N100 = N50
2. **Calculate the change in income:**
* Change in Income = New Income - Old Income
* Change in Income = N250 - N150 = N100
3. **Calculate the MPC:**
* MPC = (Change in Consumption) / (Change in Income)
* MPC = N50 / N100 = 0.5
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